Mortgage Rates Decline, Boosting Demand as Homebuyers Act
Mortgage rates dropped last week, causing a surge in mortgage applications. According to the Mortgage Bankers Association’s seasonally adjusted index, total mortgage demand increased 6.3% compared to the previous week.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased to 6.86%, while points remained unchanged at 0.70. Mortgage applications to purchase a home increased 12% from the previous week and 52% higher than the same week one year ago. The supply of homes for sale has improved this year, and the economy remains strong, keeping buyers in the market.
The increase in conventional purchase applications led to an average purchase loan size of $439,200, the highest in almost a month. Mortgage applications to refinance a home loan, however, decreased 3% for the week but were still 119% higher than the same week one year ago.
Economist Joel Kan noted that the decline in refinance activity was driven by pullbacks in FHA and VA refinances. Mortgage rates could make a bigger move after economic data is released on Wednesday, which may lead to some random trading in the bond markets during this abbreviated holiday week.